Banks and fintechs: symbiotic relationship

27-Oct-2021 Intellasia | Thoi bao Ngan hang | 5:02 AM Print This Post

According to the Vietnam Fintech Report 2020, the number of fintech companies (fintechs) has increased rapidly from 40 units in 2017 to 123 units by the end of 2020. In which, payment sector remained the dominant segment with about 30 percent participation of fintechs.

Experts assessed that the presence of fintechs has partly promoted the strong development of banking services, better meeting the increasing demands of customers. For example, without the presence and cooperation of fintechs, it is very difficult for banks’ Mobile Banking service to make great strides as today. Through fintechs, banks also have a digital ecosystem.

Vo Tan Long Digital Transformation director of PwC said that the success of digital banking is the combination of strengths of different partners into an integrated solution that can support customers’ daily life. Addressing unknown needs in customers’ journeys through financial products and services is the way to increase customer interaction with the business. In Long’s point of view, combining existing services in customers’ daily activities and banks or fintechs which provide financial products is a model being pursued in Hong Kong and Taiwan.

In the past, the emergence of fintechs made some people think that it is a competition of banks when holding the advantage of technology, creativity and quick adaptation. However, financial and banking experts share the same opinion that the above point of view has gradually been replaced by the thinking that the cooperation between fintechs and banks is to bring the best services to customers, because this is the era of the sharing economy. Banks being more open in cooperating with fintechs will be able to take advantage of outstanding technology solutions, bringing many benefits. In contrast, fintechs will be able to take advantage of banks’ accumulated customer file.

Statistics of the State Bank of Vietnam (SBV) showed that currently, about 72 percent of fintechs have linked with banks in Vietnam, only 14 percent of them develop new services and 14 percent are ready to compete with banks.

In addition, the number of cooperation deals between banks and fintechs has increased sharply in terms of quantity and scale of cooperation. For example, Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) has cooperated with Opportunity Network Company (ON) to provide a digital platform for connecting businesses that are the bank’s customers with more than 15,000 businesses in 113 countries that are member of ON. There are also deals between CIMB Bank Vietnam and Toss (South Korea), Vietnam Prosperity Commercial Joint Stock Bank (VPBank) and BE Group (Sweden), and Tien Phong Commercial Joint Stock Bank (TPBank) and Backbase (Netherlands). Some other banks have partnered with domestic fintechs.

Sharing more about this issue, Pham Quang Minh, general director of Mambu Vietnam, said that the biggest challenges of the information technology system in the past was the integration of applications. Usually, banks had to spend a lot of money to buy middle-layer software, because each software is written in a different language under different standard, and built in different period, which leads to the changes in technology.

“To ensure the integration between different applications, it is necessary to create an interpreter in the middle called middleware. The emergence of fintechs provides technology solutions to financial service industry, fintechs will specialise in doing a particular business. Fintechs with new technologies develop protocols to talk to each other according to Open Application Programming Interface (Open API). Through API, software can easily “talk” to each other, making it more convenient for banks to compile a complete customer journey from start to finish,” said Minh.

Admitting that in the early stage, the cooperation between banks and fintechs had problems when most fintechs are start-ups and thus it was very difficult to get a nod from banks, but Nguyen Hoa Binh, Chair of NextTech Group, said that reality has proven that “banks that are bold and open in cooperating with fintechs normally benefit the most”. Typically, in 2009, when NextTech partnered with Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) in enabling customers’ internet banking to make online payments, the data in that period showed that about 60 percent of online transactions were made through Vietcombank’s accounts. In the partnership with Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) to launch some mPOS, e-wallet products, etc., most of the payment transactions of mPOS later on were made through Sacombank’s system.

In the cooperation relationship between banks and fintechs, banks need to promote two factors which are the openness and being the pioneer. Pioneering in launching new products, collaborating with fintechs to turn fintechs into their extension arm. According to the Chair of NextTech Group, each bank and each branch has many targets, but fintechs have only one goal of developing customer base and transactions, so they do it very focused and achieve even better quality than banks’ development of “extended-armed” services to the community. From a fintech’s perspective, there needs to be continuous creativity in products and services to attract the cooperation from banks. Fintechs must know their strengths (sales capacity, innovation ability, etc.) in order to assert themselves.


Category: Finance, Vietnam

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